Transcript U.S. International Trade in Goods and Services A Case

The Federal Reserve Board and
Monetary Policy
A Case Study
December 12, 2006
Stephen Buckles
Vanderbilt University
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Educational Use is Granted
Figure 1. The Target for the Federal Funds Rate
9.00%
8.00%
Target Federal Funds Rate
7.00%
6.00%
5.00%
4.00%
3.00%
2.00%
1.00%
0.00%
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
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Figure 2. The Target Federal Funds Rate and the Discount
Rate
9.00%
Target Federal Funds Rate
8.00%
Discount Rate
Target Federal Funds Rate
7.00%
6.00%
5.00%
4.00%
3.00%
2.00%
1.00%
0.00%
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
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Educational Use is Granted
The action
The Federal Open Market Committee decided today to keep
its target for the federal funds rate at 5-1/4 percent.
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The action
The Federal Open Market Committee decided today to keep
its target for the federal funds rate at 5-1/4 percent.
This is the fourth
meeting in a row at
which the committee
decided to keep the
target constant.
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The reasons
Economic growth has slowed over the course of the year,
partly reflecting a substantial cooling of the housing market.
Although recent indicators have been mixed, the economy
seems likely to expand at a moderate pace on balance over
coming quarters.
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The reasons
Economic growth has slowed over the course of the year,
partly reflecting a substantial cooling of the housing market.
Although recent indicators have been mixed, the economy
seems likely to expand at a moderate pace on balance over
coming quarters.
This paragraph has not
changed with one
exception. That is the
addition of “although
recent indicators have
been mixed….”
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The reasons
Readings on core inflation have been elevated, and the high
level of resource utilization has the potential to sustain
inflation pressures. However, inflation pressures seem likely
to moderate over time, reflecting reduced impetus from energy
prices, contained inflation expectations, and the cumulative
effects of monetary policy actions and other factors restraining
aggregate demand.
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Educational Use is Granted
The reasons
Readings on core inflation have been elevated, and the high
level of resource utilization has the potential to sustain
inflation pressures. However, inflation pressures seem likely
to moderate over time, reflecting reduced impetus from energy
prices, contained inflation expectations, and the cumulative
effects of monetary policy actions and other factors restraining
aggregate demand.
This paragraph is a
recognition that
inflationary pressures
exist and continue to
be of concern to the
committee.
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The future
Nonetheless, the Committee judges that some inflation risks
remain. The extent and timing of any additional firming that
may be needed to address these risks will depend on the
evolution of the outlook for both inflation and economic
growth, as implied by incoming information.
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The future
Nonetheless, the Committee judges that some inflation risks
remain. The extent and timing of any additional firming that
may be needed to address these risks will depend on the
evolution of the outlook for both inflation and economic
growth, as implied by incoming information.
The current and past
policy actions should
continue to work. It may
be that further change is
not necessary. However,
new data will influence
that decision.
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The vote
Voting for the FOMC monetary policy action were: Ben S.
Bernanke, Chairman; Timothy F. Geithner, Vice Chairman;
Susan S. Bies; Donald L. Kohn; Randall S. Kroszner; Frederic
S. Mishkin; Sandra Pianalto; William Poole; Kevin M. Warsh;
and Janet L. Yellen. Voting against was Jeffrey M. Lacker,
who preferred an increase of 25 basis points in the federal
funds rate target at this meeting.
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The vote
Voting for the FOMC monetary policy action were: Ben S.
Bernanke, Chairman; Timothy F. Geithner, Vice Chairman;
Susan S. Bies; Donald L. Kohn; Randall S. Kroszner; Frederic
S. Mishkin; Sandra Pianalto; William Poole; Kevin M. Warsh;
and Janet L. Yellen. Voting against was Jeffrey M. Lacker,
who preferred an increase of 25 basis points in the federal
funds rate target at this meeting.
This report of the voting shows the
majority vote in favor of no change.
One member has voted four meetings
in a row to increase in the target
federal funds rate.
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